Impulse Buying Can Damage Your Credit Score

Impulse Buying - Why do we buy things at whim?

We have all been guilty of impulse buying at some time or the other. Impulse buying is a spur of the moment decision, unplanned, made just before making a purchase. Buying anything due to a sudden urge, without prior planning, without really having a logical reason to buy, is what impulse buying is all about. Such emotions can be triggered by a number of factors like seeing the product, or even a well-crafted promotional campaign. These purchases in themselves can vary from small items like chocolates or clothes, to substantially large items like jewelry or vehicles. Up to 80% of the times, impulse buying can end up causing subsequent regret and financial discord. The most severe of these however, is the fact that impulse buying can also damage your credit score.

 

How can impulse buying dent your credit score?

Impulse buying has become rather easy these days. Add to that the simple lack of financial literacy, experts agree that impulse buying is one of the major reasons for overspending. Since a lot of purchases are made on EMIs, one has to be diligent in repaying them.But if there is a financial shortfall for one reason or the other, you not only end up defaulting on your EMIs, your credit score also gets adversely affected.

 

How your credit score relates to your future financial goals?

Most of the time, people are not even aware about the credit scoring system, much less about their own standing in that system. It is when they are about to buy a home, or start a business, or make a major purchase, and need to take out a loan, that they realize the impact of their reckless spending on their credit scores.

A credit score is used by lenders and banks to help them assess how eligible you are for a loan or line of credit, and how much interest you should be charged for it. Your credit score forms a picture of you as a credit risk at the time you apply. The riskier you appear to be, the lesser are the chances of your getting credit. Even if you get approved for credit with a bad credit score, you can expect to be charged a much higher rate of interest.

 

Handy tips to refrain from impulse buying to keep up your credit score

You are not alone if you have fallen prey to impulse buying as a number of people find it rather hard to avoid it. However, there are a few steps that you can take in order to avoid the sudden urge to ruin your credit score.

Don’t stop completely

If you suddenly, utterly and completely stop buying stuff, you will reach a breaking point and end up spending way more than what you were initially.

Give it time

If you suddenly have an urge to buy something, how do you know that you don’t really need it? The simple trick to this is to wait for a week. Make a list, and write what you wanted to buy. Then give it some time and if after a week you still want it, then it was not just an impulse as most of the times, the urge to buy an item would have passed.

Calculate the value

To really convince yourself not to buy an unnecessary thing, try to calculate the item’s value in terms of the number of hours/days that you will have to work to pay it off. Then consider whether it is still worth the amount of work that will have to go into it.

Plan

Planning your purchases is also a good idea. You of course cannot stop shopping altogether, but you can plan it. Make a list of necessary items when you go shopping and stick to it.

Keep the end in mind

This is probably the most important thing that you can do to control any wayward expenses. Always keep the future in mind and consider what the impulse buying will do to your credit score. Everyone has financial goals for the future; consider whether wrecking them for a few moments of gratification is worth it.

 

Impulse buying is a rather common occurrence, but exercising some control is all it takes to escape the deep pit of impulsiveness.